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Old 02-14-2018, 12:31 PM   #1 (permalink)
 
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Default Managing Hobby Cash Flow?

First of all, I would like to say after a short time of being a part of this forum, I am extremely impressed with how welcoming everyone is here and the lack of hostility I have often seen on forums for other hobbies.

I am a young guy (as I'm sure everyone else is here, too) who has just picked up this hobby, and my current situation in life (no kids) allows me a little expendable income and time. However, I'm wanting to make this hobby self-sufficient, meaning that once I start pen turning the hobby sort of finances itself. From what I've seen so far is that this should be possible as I've made less than 10 pens and have sold 4 of them, and the rest were given away as freebies to family. I really enjoy the whole process from planning the pen, turning it, to finally selling it.

So now I will actually get to my question. Do you have any advice on how to manage cash flow for hobbies, especially pen turning? Do you hide the cash in a shoebox under the bed? When do you know when to reinvest your earnings into more stock? I'm talking smaller scale hobby here. I want to get this thing started on the right foot, and I want to have anything hobby related segregated away from my personal finances.

I appreciate all of your sage advice!
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Old 02-14-2018, 12:33 PM   #2 (permalink)
 
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Before we can answer, there is an additional bit of information you must provide:

Do you have a significant other who has a voice in your financial decisions?
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Old 02-14-2018, 12:41 PM   #3 (permalink)
 
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Quote:
Originally Posted by monophoto View Post
Before we can answer, there is an additional bit of information you must provide:

Do you have a significant other who has a voice in your financial decisions?
Yes, yes there is. BUT, she was the one who started this whole thing. I mentioned I thought I would like to do this one day, with out any intention of doing it, and then I received a very unexpected Christmas present.

So she is in support of the hobby, but I don't want her to regret her decision!

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Old 02-14-2018, 12:42 PM   #4 (permalink)
 
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Open a new checking account... fund it with what you're willing to spend. Do NOT spend money from any other source. Quickbooks through Etsy is about $5/mo.

Anything less than that and you will be fudging the amounts. That's just how it goes.
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Old 02-14-2018, 01:02 PM   #5 (permalink)
 
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Run an excel spread sheet to track fund in and out.
These are tips for low volume ~100 pens a year.

1) No freebies. If you want to give away to family, save it for birthdays and Holidays, and refund yourself a decent amount to cover the value of the pen. e.g.$25 or $30.

2) Limit the amount of variety to 3 items or so, and limit your reserve stock. Depends how you sell. Do you do one-off customs for coworkers, who commission a piece or do you build in bulk and sell at shows. Commissioned pieces help you limit your investment in stock. Don;t try to build every kit on Penn State Ind.
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Old 02-14-2018, 01:29 PM   #6 (permalink)
 
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When i started I had a similar goal. I set up a very basic spreadsheet. I entered every expense and every pen I sold. The spreadsheet kept a an expense total, income total and a running balance so I could see how far in the hole I was.

After initial start up costs such as lathe, tools, sharpening system and some pen kits and blanks my goal was to spend less then I was earning and it worked well as I was slowly watching the hole I was in getting smaller.

The problem was, it all changed when I decided I wanted to start turning bigger stuff for fun, bought a bandsaw, a bigger lathe and some other tools that were 'wants' not 'needs'.

I have a monthly budget for my turning hobby. If I sell anything, either something I made or a tool I no longer need, that money gets added to my hobby funds.
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Old 02-14-2018, 01:34 PM   #7 (permalink)
 
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You really do not want to know how much money you are spending on a hobby.
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Old 02-14-2018, 02:12 PM   #8 (permalink)
 
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Originally Posted by RobS View Post
2) Limit the amount of variety to 3 items or so, and limit your reserve stock. Depends how you sell. Do you do one-off customs for coworkers, who commission a piece or do you build in bulk and sell at shows. Commissioned pieces help you limit your investment in stock. Don;t try to build every kit on Penn State Ind.
I am assuming that this recommendation is due (at least in part) to the cost of bushings -- I suggest switching to TBC, no need to buy bushings. I don't feel bad about making only 1 of a certain style. And the variety keeps things interesting for a low volume hobbyist. However, note that failures are more common the first time you make a kit, so this can drive costs up a little.

As for the inventory aspect, I agree to a certain extent. I suggest buying kits either through group purchase or with a 20% off coupon through PSI, and get enough volume to get the 1st level discount (sometimes only 5 kits). This will reasonably minimize the cost per kit, with shipping included. Just don't go crazy, making 100 pens per year, there really isn't a need to have more than 50 or so kits. Same goes for blanks -- unless you are a collector (aka hoarder), at which point it is just sunk cost, lots of sunk cost...
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Old 02-14-2018, 02:47 PM   #9 (permalink)
 
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I try to buy about once a year, I project on past years experience what I think I will need for the upcoming year. If you buy in small amounts for your monthly needs, you will pay shipping 12 times. Special orders, or new needs can change that system, but if I do need to order more often, I try to maximize the order to save on the shipping costs.
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Old 02-14-2018, 03:01 PM   #10 (permalink)
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Keep it simple. It's real easy to get bogged down in the record keeping and other business aspects of what is suppose to be a hobby. As mentioned earlier, open a checking account, fund it and go from there. If you need something and you have the money in the account to buy it great! If not, wait. Build a profit into your sales that you are comfortable with (pricing you work is a whole other conversation). Spend your time in the shop turning, not at your desk balancing spread sheets.
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